||Relations Between Banks and Affiliated Organizations
The Financial Institutions Bureau has now had several years
of experience in examining banks affiliated with bank holding
companies and observing the relationship between the affiliated
banks and their parent holding companies.
Many positive inputs have resulted from such affiliations
such as improved management succession, more representative,
younger and more active Board members, implementation of a number
of needed capital improvement programs and improved and more
competitive banking services in several Michigan communities.
There have been, in a few cases, some failures to recognize
proper relationships between the holding company (as the sole
or majority stockholder) and the affiliated bank. The comments
below are intended to avoid the possibility of what could be
improper practices from becoming prevalent, if noted carefully
by the management and Board of each bank.
Because of the importance of these matters, the Bureau requires
that this bulletin be incorporated in the official minutes of
the Board of Directors of all state-chartered banks affiliated
with a bank holding company. The Bureau has instructed examiners
to report and criticize any failure to observe these guidelines.
- The Board of Directors of each bank is responsible for all
significant decisions affecting each bank and cannot delegate
in any way their ultimate responsibilities for the protection
of depositors and service to the bank's communities.
While suggestions for policies from the holding company
are appropriate, the Board must make decisions predicated
on the best interest of their bank and consistent with their
responsibilities to depositors, borrowers and the community.
The decisions of the Board must be based on full and complete
- Management decisions relating to important matters such
as capital, liquidity, loans and investments must be made
within the bank and all such decisions must reflect the considered
best interest of the bank and not be influenced by outside
considerations (except that outside counsel may be retained
- Essential records and documentation must always be available
within the bank for the use of the Board, management and supervisory
These records do not include documents in the process
of being posted electronically by an EDP service facility
not owned or operated by the bank.
||Richard J. Francis, Commissioner
||November 14, 1975